Air Greenland wins an outstanding award
On Monday, 9 May 2022, Air Greenland received an award for the loan financing agreement that finances the company’s fleet renewal. The award is an acknowledgement from professionals who deal exclusively with finance in the aviation and leasing industry.
Air Greenland’s CFO, Mogens E. Jensen, received the “European Editor’s Deal of the Year” award on behalf of the company. This happened on Monday at 18:00 Greenland time during the annual “Aviation 100 deals of the Year” awards ceremony, held in Dublin, Ireland. As the title suggests, the awards are about the best deals made in the aviation and leasing industry over the past year.
“The fact that Air Greenland has received an award in the prestigious company of several hundred participants from international airlines and finance companies shows that the loan financing agreement that we entered into on the US private placement market (USPP market, which primarily consists of pension funds, ed.) is a good deal,” says CFO, Mogens Jensen.
The loan financing agreement that Air Greenland entered into is for DKK 1,140 million, and the process of finding financing to invest in the aircraft fleet began in 2019, shortly after Air Greenland became 100% owned by the Government of Greenland. At that time, Air Greenland was facing the need to bid for SAR operations and the Government of Greenland’s service contracts, as well as to replace the Atlantic aircraft, now almost 25-years-old.
After a long process of exploring the loan market and presentations on the Nordic market, Air Greenland’s management decided to explore the USPP market, which is a private bond market that provides loans to companies.
“For the financing, we focused, among other things, on low exchange rate risk, which means that loans in Danish kroner were preferred, long repayment periods, and repayment profiles that reflected the expected values of the main fixed assets. There was also a focus on collateral and other requirements for future performance, to name some of the issues we worked on,” explains Mogens Jensen.
“In our evaluation of the financing options, it was considered that the USPP could be the most attractive option. In collaboration with SEB bank in Denmark and CITI in New York, it was possible to present a thorough presentation of Air Greenland to interested US investors. In addition to talking about historical achievements, we emphasised the measures and investments that were forward-looking and incorporated in the 5-year long-term budget, which was based on conservative principles,” says Mogens Jensen and continues.
“After the presentation by the management, the potential investors could ask questions. Normally, such a presentation is made physically via so-called “roadshows”, but this was not possible because of Covid-19, so it was done online.”
After this process, investors could bid on the repayment profiles set up, which should reflect the depreciation of the new assets. These were divided into:
- A 5-year loan without repayment instalments
- A 10-year loan with regular repayment instalments
- A 15-year loan with regular repayment instalments
“We were pleasantly surprised by the American investors’ knowledge of Greenland and understanding of the infrastructure challenges and the vision to elevate Greenland sustainably. When we put the loan financing in place, there was much uncertainty in the airline industry because of Covid-19. The positive reception of our presentations and the subsequent dialogue with the investors who provided loan capital for our national airline tells me that there is confidence in Air Greenland and Greenland,” he says.
Asked how it felt to stand on stage and receive the award that the European editors have named the best “private placement deal”, Mogens Jensen replies.
“For Air Greenland, funding was essential and long-term but being recognised in a forum where it’s more often about billions of dollars matters. The stable performance and growth of the last several years mean a lot to investors, and it now helps to make it possible to invest in our fleet and assets for the benefit of the company and society and without the company being locked into other investments in the future. The loan financing improves Air Greenland’s competitiveness, which is crucial.”
In addition to the participation of the banks mentioned above in the process, the law firm Gorrissen Federspiel represented the local legislation and Air Greenland’s interests, a US lawyer represented the USPP agreement on behalf of Air Greenland and a US lawyer on behalf of the USPP investors, but all in all, it was an efficient process.
Of the total loan of 1,140 MDKK, 655 MDKK were disbursed last April, and the rest will be disbursed this month.
The “European Editor’s Deal of the Year” award is presented by the international specialist magazine Airline Economics. The magazine is also the organiser of the awards ceremony.